Cryptocurrency Glossary: The Language Of DeFi

In Summary:

  • The crypto market carries its own unique, ever-expanding terminology
  • Some terms refer to complicated blockchain processes, but traders don’t have to understand every part of the technology to enjoy crypto

Introduction 

Somewhere between cutting-edge financial technology, decentralized monetary systems, and internet meme culture, you arrive at cryptocurrency. From this fusion of technology and populism, digital currencies carry their own language that seems alien to even the most experienced traders of traditional assets.  

We’ve compiled a straightforward crypto glossary to help you decode some of the most common crypto terminologies. Of course, this list is by no means exhaustive because the industry is changing all the time, but that’s part of the appeal of this asset class. 

Crypto Glossary 

Address 

An alphanumeric identifier of a transaction’s destination. It is single-use and has no reference to the sender. 

Airdrop 

Free distribution of crypto to a given audience for promotional purposes. 

Altcoin 

Short for “alternative coin”, this refers to any coin that is not Bitcoin.  

Atomic Swap 

A method of exchanging different cryptos across different chains without using an intermediary. 

Bitcoin 

The original and most popular cryptocurrency! Bitcoin still holds the highest value and the biggest share of the crypto market. 

Blockchain 

The database of crypto transactions, which are added in blocks. The chain enhances security by making the blocks immutable (unchangeable) whilst being distributed (publicly viewable). 

Burning 

The process of removing coins from circulating supply. This is a deflationary method to increase demand and value. 

CBDC 

Central Bank Digital Currency – a concept currently being researched by at least 80% of global banks, whereby banks would release a digital version of a fiat currency in an attempt to harness the crypto hype. 

Cold Storage 

The storage of crypto offline to protect from hacking, most commonly in paper or hardware wallets. 

Consensus Mechanism 

The principle of validating new blockchain data through mutual approval instead of through a single authority, e.g. Proof-of-Stake/Proof-of-Work. 

Dapp 

Short for Decentralized Applications, which are applications built on blockchain to perform functions, no single point of control/authority. 

De-Fi 

Abbreviated from Decentralized Finance, this is the concept behind cryptocurrency whereby no institutional intermediary or centralized exchange is relied upon for transactions. 

Diamond Hands 

A committed and optimistic HODLer or investor in a given crypto who will not sell even when prices fall. 

Dumping 

The sudden sell-off of crypto that can cause prices to plummet.  

Faucet 

A web-based distributer of tiny crypto rewards in return for the completion of menial tasks, games, or adverts. 

Fiat 

Derived from the Latin meaning ‘let it become’, this is the term used to describe currencies given value solely through government endorsement, and not backed by a physical asset (such as gold). 

Flippening  

Most commonly, this refers to a hypothetical moment in the future when Ethereum will overtake Bitcoin in value or market dominance. 

FOMO 

“Fear Of Missing Out” – the emotional hype that can cause traders to rush into crypto investments. 

Fork 

A new branch attached to the existing blockchain with different functionality.  

FUD 

“Fear, Uncertainty, Doubt” – negative coverage of a crypto asset. 

Full Node 

A core server that stores all blockchain history and authenticates new transactions. 

Hash Function 

A process of cryptography whereby an equation processes inputs to create a unique encrypted code.  

HODL 

The term for buying and asset and “Holding On for Dear Life”. 

Hot Wallet 

The online storage of crypto through a web or mobile wallet. This makes funds more accessible for transactions, but also more vulnerable to hackers. 

JOMO 

The opposite to FOMO, the “Joy Of Missing Out” refers to traders refraining from following the crowd in the investments. 

LAMBO 

This abbreviation of Lamborghini has become a nickname for the new generation of crypto profiteers according to their customary taste for supercars. 

Layer Two 

A standalone system that can be overlayed upon existing blockchains to utilize their functionality but avoid restrictions, e.g. the Lightning Network. 

Lightweight Node 

A platform that uses Simplified Payment Verification (SPV) via a full node to complete transactions. Essentially, it offers access to the blockchain data without having to download the full chain. 

Market Capitalisation 

The total value of a coin in circulation, i.e. coin value multiplied by the number in circulation. 

Maximum Supply 

The cap of a crypto’s supply to protect value and increase demand, e.g. Bitcoin is capped at 21 million. 

Mining 

The process of computers performing complex calculations to process transactions in “blocks” and earn rewards in new coins. 

Mining Pool 

A group of investors who pool resources for mining operations in return for split rewards. Crypto Glossary

Moon 

Crypto-enthusiasts’ notation for astronomical price climbs, i.e. “x is going to the moon”. 

NFT 

Short for Non-Fungible Token – a collectible (e.g. artwork or music) with a digital signature that gives it value through being unique. 

P2P 

Peer-to-Peer – the interaction between network participants without need for centralized mediation. 

Public Key 

A cryptographic code that produces a public address to receive crypto transactions.  

Pump & Dump

The organized buying and selling of a crypto in mass, causing major volatility. 

Private Key 

A 64 character alphanumeric code that functions like a password, allowing the owner of funds to make transactions. 

POS 

An alternative consensus mechanism that is less energy-intensive than POW – transactions are instead validated by users who have staked funds. 

POW 

See mining – the consensus mechanism of verifying transactions through computational mining. 

Satoshi 

The smallest unit of Bitcoin, at 0.00000001 BTC, named in honour of the Bitcoin creator. 

Seed Phrase 

A series of words generated from wallet to grant access to funds. It can be used to restore a wallet and private keys. 

Stablecoin 

A coin with low volatility, often backed by a physical asset or fiat currency. 

Token 

Tokens are distinct from coins in that they have no monetary value and instead offer a specific utility on the blockchain, e.g. security tokens or NFTs. 

Unit Bias 

A bias towards owning whole units of cheaper cryptos than small fractions of more valuable ones. 

Volatility  

The rate of change of price – volatility is notoriously high in cryptos, which means opportunity for huge profit and huge loss. 

Wallet 

The general method of crypto storage. Each wallet is recorded in the blockchain through a public key, contains the trader’s private keys and is backed up by a seed phrase. 

Weak Hands 

The opposite of diamond hands, this describes a trader who sells at the first sign of prices falling. 

Whale 

A large holder of an asset who is dominant enough to influence its price. 

Final Thoughts 

Hopefully, our guide can shed some light on common crypto terminology and help you tackle these assets with confidence. Blockchain technology is highly complex, but you don’t need to understand every detail of how cryptos function to enjoy their value. The beauty of cryptos is their diversity; the industry is constantly evolving and offers interesting opportunities for every kind of trader.  

*This website is not directed at any jurisdiction and is not intended for any use that would be contrary to local law or regulation.

**Risk Warning: Trading leveraged products such as Forex may not be suitable for all investors as they carry a degree of risk to your capital. Please ensure that you fully understand the risks involved, taking into account your investment objectives and level of experience, before trading, and if necessary seek independent advice.